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This comment letter responds to a proposed rule issued by the Office of the Comptroller of the Currency (OCC), which would “codify” an alleged federal common-law “principle” known as “valid-when-made.” The proposed rule would amend two of the OCC’s regulations – 12 C.F.R. 7.4001 and 12 C.F.R. 160.110 – by providing that “interest on a loan that is permissible” for a national bank or a federal savings association, under 12 U.S.C. 85 or 12 U.S.C. 1463(g)(1), “shall not be affected by the sale, assignment, or other transfer of the loan.” 84 Fed. Reg. 64229, 64230-31 (Nov. 21, 2019). Thus, the OCC’s proposed rule seeks to expand the scope of federal preemption of state usury laws beyond national banks and federal thrifts to reach purchasers, assignees, and transferees of their loans.

The comment letter maintains that, for the following three reasons, the proposed rule exceeds the OCC’s authority and is contrary to the public interest:

(1) The proposed rule does not comply with the procedural and substantive requirements of 12 U.S.C. 25b, which governs rules and orders issued by the OCC that seek to preempt state consumer financial laws.

(2) The proposed rule would unlawfully expand the preemptive scope of 12 U.S.C. 85 and 1463(g)(1) beyond the limits established by Congress, without congressional authorization and in contravention of applicable court decisions.

(3) The proposed rule is contrary to the public interest because it would encourage predatory high-cost lending and other abusive practices that would inflict very serious injuries on consumers.

The comment letter therefore contends that the OCC should withdraw the proposed rule, and the OCC should not issue any other rule or order that would attempt to expand the preemptive scope of 12 U.S.C. 85 and 1463(g) to reach purchasers, assignees, and transferees of loans made by national banks and federal thrifts.

GW Paper Series

No. 2020-03

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